A discussion of neoliberal health and education policies and their effect in developing countries

Published: 2019/12/12 Number of words: 3677

In the light of economic inequality, to what extent can neoliberal health and education policies transform development outcomes?

In the last three decades, neoliberalism has been the dominant approach to policy. The concept in its broadest terms refers to ‘the deregulation of the economy, trade liberalization, the dismantling of the public sector, and the predominance of the financial sector of the economy over production and commerce’ (Tabb, 2002: 7). In terms of health and education, developing countries in particular have seen the emergence of privatization, user fees, and decentralization due to the proliferation of neoliberal policy. This essay will focus on the relationship between health and education and development outcomes in the Latin American and sub-Saharan African context. First, I will review and examine the economic arguments for investment in health and education in the human capital approach whereby health and education are seen as magic bullets for growth. Secondly, I will discuss the broad trends in health and education discourse in the neoliberal era, highlighting the departure of public provision and the introduction of cost-cutting measures and the co-production of health and education services. I will also discuss the tendency for mainstream economic and development policy discourse to view health and education access as beneficial for economic growth rather than as a basic human right or social redistributive mechanism. Thirdly, I will assess the impact neoliberal policies have had on on health and education, arguing that the benefits of the policies have not materialized as anticipated and that this has resulted in lack of equality in development outcomes. Lastly, and towards the end of the discussion on impacts, I will develop the debate on the lack of equality in outcomes by examining the structural inequalities in health and education access and outcomes in relation to issues such as class and gender.


Health and education for growth?

The relationship between health and education on the one hand, and productivity and economic growth on the other, and the importance of human capital has been widely accepted as a given in neoclassical economics. Schultz (1960) and Becker (1964) regard investment in human capital through education, training and health care as being similar to investment in physical capital, and that the investment will yield additional output due to higher productivity. In this sense, the human capital approach is underpinned by Say’s law which assumes that the supply of educated, healthy workers will create a demand for such workers within perfectly operating markets. However, as we will see, the human capital approach to economic growth is undermined by theoretical and empirical weaknesses (Johnston, 2011). For example, the concept of human capital doesn’t take into account the socio-cultural context of education and health in a given country, and the context of the wider political economy that can produce unequal outcomes and dampen the potential benefits of schooling. Pritchett (2001) critiques the relationship between education investment and economic growth by showing no link between education and growth when primary school enrolment rates are replaced with years of schooling completed.


Neoliberal trends and complexities

The health sector under neoliberalism has experienced a reduction in state provision of health care, decentralization, increased private sector provision, health insurance packages and user-fee proliferation. The reforms have reframed the role of users and professionals in public services; consumers are framed as being active agents with the ability to design and deliver services in order to improve outcomes (Ostrom, 1996). The outcomes in relation to the development of these health sector reforms will be discussed in the following section, but the impact is not clear-cut and requires an appreciation of the broader complexities that exist in the context of the communities.

The education sector under neoliberalism has experienced an increase in public expenditure on primary education and the abolition of primary school fees, with the exception of the reintroduction of fees under structural adjustment programmes. Targeted interventions such as conditional cash transfers, social protection programmes and national school feeding programmes have also been operationalized in South America, Asia and sub-Saharan Africa (SSA). However, neoliberal policy has also led to the cutting back of civil service positions, reduced state-owned enterprises and trade liberalization (Bennell, 2002; Shafaeddin, 2005; Lall, 1995; Noorbakhsh and Paloni, 2000) all of which interact with labour markets and therefore the potential benefits of schooling. The outcomes of these education changes will be discussed in the following section but it is clear the anticipated results from the rather simplistic expansion of primary education have not materialized due to structural inequalities and disadvantageous labour markets, and trade and industrial policies. Sen and Mukherjee (2014) are critical of the current development agenda and the Millennium Development Goals (MDGs) due to the MDGs’ tendency to reduce women’s empowerment to educational rights, particularly primary education, rather than acknowledge the multiplicity, interdependency and holistic nature of the rights of women. In other words, women’s empowerment has been distorted and ‘development silos’ have been created instrumentalizing women for economic growth and poverty alleviation through the use of particularly reductionist and simplistic indicators.


The Impacts

Decentralization has occurred in most parts of SSA following the Bamako Initiative in 1987 that called for the decentralization of health services, greater community participation, cost-recovery programmes and the establishment of various forms of user fees (Willis & Khan, 2009). The introduction of user fees has led to mixed results; Bonu et al. (2003) demonstrate how user fees led to a decrease in health service utilization due to the financial burden on poor households. Willis and Khan (2009) highlight that the cost of transport to health facilities in Mali deter expectant mothers from attending health clinics regularly and the subsequent service charges and prescriptions fees increase their financial burden. 
The elimination of user fees in Ugandan health facilities resulted in an increase in the utilization of health services, especially among the poor sections of society (Xu et al., 2006). However, to add to the complexity of the debate surrounding user fees, studies show that the introduction of user fees in conjunction with an increase in the quality of health services increases health service utilization (Litvark & Bodart, 1993; Jancloes et al., 1982). For example, user fees in Senegal increased utilization rates from five per cent to 60 per cent in some districts, where free provision for the most vulnerable individuals and an elected health community was available.

Decentralization has been an integral part of Latin American policy since the 1980s; primary health care is largely the responsibility of municipal authorities and a health insurance scheme, FONASA, is in place to collect contributions and allocate resources to the health service providers. However, this generated large inequalities due to insufficient funds and increased responsibility for the municipal authorities without the economic resources to deliver quality services (Gideon, 2001). Today, approximately 40 per cent of the Chilean population is covered by private insurance initiated under the Pinochet dictatorship (ISAPRES); this resulted in the perpetuation of inequalities and clear gender discrimination whereby women of reproductive age pay up to three times as much as their male counterparts for health plans (Gideon, 2007). In broader terms, recent economic growth under the global economic restructuring and trade liberalization has led to the expansion of the informal economy and the informalisation of the labour market through global commodity chains. Gideon (2007) stipulates that the proliferation of informal employment has exacerbated the impact of neoliberal health policies in Chile; the nature of informal work makes it difficult for individuals and households to make the regular contributions required for health insurance coverage, with women often being disproportionally affected.

Dannreuther and Gideon (2008) argue that recent health sector reforms in Chile neglected a universal health system that would have downplayed differences between social groups and help remove socio-economic health inequalities, while promoting financial contribution in order to secure rights to health services (ISAPRES or FONASA. Women are often only able to gain access to health services by means of a dependent form of citizenship (via the male breadwinner) as entitlements to health care are dependent on the recognition of individual financial contribution rather than any sort of redistributive mechanism through collective earnings. Despite new health sector reforms and the emergence of Plan AUGE[1] that removed the concept of breadwinner bias, the health system in Chile remains dependent on the domestic, caregiving role of mothers. This is due to AUGE’s gendered assumptions surrounding women’s ability to perform unpaid care; in order to reduce patient time in hospital, chronically and terminally ill patients are cared for in the home, usually by a female family member who is also participating in paid work.

Neoliberal professionalization[2] in development and the health sector and its emphasis on community participation also relies heavily on women’s unpaid labour. Jenkins (2008) explores the professionalization of grassroots health promoters in Peru as a result of the neoliberal agenda that has emphasized volunteerism and the role of the third sector in sustaining public services in local communities. In other words, although grassroots professionalization may be seen as a form of resistance to neoliberal processes it is also embedded with neoliberal values. As with education, health policy must be analysed within the broader context of labour markets and the current economic context in order to understand the unequal outcomes of neoliberal health policies.

Conditional cash transfers have become popular in the Latin American social policy agenda: payments are conditional on school attendance and participation in health care, in the hope of enhancing human capital and the co-production of public services. The Bolsa Familia scheme in Brazil provides the poor with cash payments conditional on school attendance, children’s vaccinations, health clinic attendance and nutrition and vocational training courses. The Bolsa Familia scheme has been widely praised for targeting the poorest sectors of the population (Hall, 2008) but has been criticised for channeling cash transfers to basic consumption rather than using them for productive purposes. The scheme has also been criticized because of its underlying political rationale and most importantly, it has been argued that despite strengthening the demand for health and education services, there has been a lack of improvement in the supply and quality of such services.

Handa and Davis (2006) argue that the conditional cash transfers have unexpectedly resulted in lower levels of investment in education and health service provision. Federal spending on welfare programmes and social investment fell significantly in conjunction with increases in social assistance for the poor. In view of this, it is clear that cash transfers must be recognized by policy makers as being complementary rather than as a substitute for the provision of social services. Cash transfers can also only perform a desirable function in relation to health and education if they are supported by high quality services in the host communities.

The universal primary education (UPE) initiative has dominated education policy in SSA for decades. This has resulted in increasing numbers enrolling in primary education and an increase in government spending on primary education as user fees have been phased out. However, Johnston (2011) raises concerns about access to primary education and its current outcomes. For example, current school enrolment data does not reflect rates of attendance throughout the academic year or factor in dropout rates. Country-level data shows mixed results in relation to education access with great diversity between African nations. National-level data also overlooks education participation along class, gender and rural–urban differentials. Johnston (2011) demonstrates that in countries with high rates of school attendance, children from the poorest households account for approximately 40 per cent of non-attendants (countries such as Cameroon, Kenya, Ghana, Mozambique, Nigeria and Zambia). At face value, the abolition of primary school fees could be perceived as step towards equal access and poverty alleviation; however, there are a number of more critical issues to be considered. Fleshman (2010) and the World Bank (2009) recognize that poor households are burdened with financial costs such as uniforms, transport and textbooks. Studies in Malawi (World Bank 2009), Uganda and Kenya (Boissere, 2004) demonstrate that fee abolition has resulted in a deterioration in the quality of education and overall, reduced the incentives for children to stay in school. High pupil–teacher ratios, increasing numbers of under-qualified teachers, and poor literacy skills are well-documented issues faced in SSA countries (Johnston, 2011). The current educational policy focusing on enrolment (a variable that is easily quantified and measured within a positivist and neoliberal policy arena) undermines the focus on important outcomes of education policy such as the completion of years and the quality of education attained.

The removal of financial barriers to enrolment in school represents just one form of intervention in education policy. Aikman and Unterhalter (2005) highlight a variety of barriers to girls’ enrolment in school other than school fees. Deep-seated structural inequalities in most developing countries contribute to unequal access to education and unequal outcomes of school enrolment. For example, girls’ school enrolment in Egypt dropped significantly when schools were located long distances from homes (Rugh, 2000). Schools often fail to protect girls from sexual harassment and teachers and the curricula often perpetuate gender stereotypes and inequalities (Bhana, 2009). Ultimately, gender mainstreaming in Education For All and the UPE strategies have focused on rather simplistic barriers to education access, assuming that gender and class (as will be discussed below) inequalities would be addressed by free universal primary education.

The overwhelming focus of education policy on primary education derives from earlier data collection that suggests the highest rates of return[3] for education in developing countries are for the primary level (Psacharopoulos & Patrinos, 2002). However, more recent studies (Schultz, 2004; Lassibille & Tan, 2005; Appleton et al., 2003) suggest that higher rates of return occur at higher levels of educational attainment. Thus, what is important to investigate here is the socio-economic factors that enable certain income groups to benefit from various levels of education. Davoodi et al. (2003) illustrate that the richest quintile of households benefit more from public expenditure on education, particularly at secondary and tertiary levels (see Table 1). Therefore, as richer households benefit disproportionately to secondary and tertiary education expenditure, they are also benefiting from the higher rates of return of higher education in relation to income earnings and employment.

Table 1: Shows benefit incidence of public education expenditure in SSA in 1990s (un-weighted average, % of total spending)

Source: Davoodi et al. (2003) p.21


The relationship between education and health returns has also been widely documented and scholarly studies suggest the greatest health returns occur at secondary-level education, particularly for girls. Ainsworth et al. (1995) stipulate that primary education has a limited impact on fertility in SSA countries. Overall, the evidence discussed in the preceding sections seems to suggest that universal access to primary education may not transform economic or health outcomes due to the importance of secondary and tertiary education, a service the poorest children in society are consistently excluded from. Furthermore, apart from education and health policy domains, economic conditions and liberalization policies have diminished the ability of education to raise growth rates due to reduced markets for skilled labour and a reduction in formal sector employment. In other words, the human capital approach to growth overlooks the realities of markets in developing countries.



This essay has reviewed the rationale for investment in health and education, highlighting the current preference and focus on growth and human capital theories at the expense of human rights. Recent broad trends in health and education have been highlighted and their reductionist, individualized and demand driven prescriptions criticized. Neoliberal health and education policies that attempt to transform development outcomes by essentially increasing the demand for education and health services can offer a win-win situation providing there is an adequate supply of such services and those most in need are targeted. However, as this discussion has demonstrated, there are inherent flaws in such reductionist policies that lack integration into broader labour, trade and industry markets saturated with neoliberal doctrines, and neglect the importance of supply-side reforms.

It must also be noted that great inequalities still persist in access to education and health services between and within developing countries. Health and education systems of provision can also serve as active agents in perpetuating the cycle of structural inequalities in relation to class, gender and race. Overall, I would argue that empirical evidence suggests that neoliberal health and education policies and the general and universalistic MDG goals can only transform development outcomes to a limited extent due their isolation from labour markets, trade and industrial policies, and gender and class issues.



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[1] The Universal Plan of Explicit Guarantees in Health; a “system of social guarantees in relation to health care for all citizens, regardless of their income level” but at present applies to a limited number of health interventions for 56 health conditions (Dannreuther and Gideon, 2008: 846).

[2] The process of professionalization is defined as ‘the development of careers and provision of training for activists within the development sector’ (Jenkins, 2008: 143).

[3] Refers to private rates of return; ‘relates changes in individual earnings to differences in the number of years of education’ (Johnston, 2011, 106).

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